Why'd Cali Downplay Market Viability for Green Car Grants?

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At certain points in history, California regulators have helped to nourish the green car market by supporting more efficient and lower emission vehicles in the state. But last week, when the California Energy Commission released its proposal for doling out $19 million in grants for nearly a dozen green car manufacturing projects, it became clear that sometimes the CEC just doesn’t give market viability much weight when ranking winners and losers.

Case in point: Green Vehicles Inc, the company that earned the highest score (84 percent) in the CEC’s evaluation process for the $19 million grant competition, which is meant to take a big bite out of greenhouse gas emissions while supporting job-creating new technology firms and stimulating economic growth. Green Vehicles aims to build three-wheeled, two-seat electric vehicles for a relatively tiny and unproven segment of the plug-in vehicle market. The score suggests a need for more scrutiny of how these proposed projects will turn into sustainable businesses after public funds dry up.

Making the Cut

Electric motorcycle developer Mission Motor Co. and fleet vehicle maker Electric Vehicles International came in close behind Green Vehicles, earning scores of 81 and 80.5 percent, respectively. The remaining awardees, included Boulder Electric Vehicle, Coulomb Technologies, Zero Motorcycles, Fisker Automotive partner Quantum Fuel System Technologies Worldwide (s QTWW), and Wrightspeed (the hybrid drive system startup headed up by Tesla Motors (s TSLA) co-founder Ian Wright).

Companies that didn’t make the cut in this round ranged from early stage electric roadster developer Saba Motors (62.5 percent) and three-wheeled electric vehicle venture Revolution Motors (41.9 percent), to more established firms like US Hybrid Corp (27.4 percent) and Enova Systems Inc (62.7 percent). The largest proposed awards are for Electric Vehicles International ($3.89 million), Boulder Electric Vehicle ($3 million), Leyden Energy (a lithium-ion battery developer previously named Mobius Power, for $2.96 million), and Green Vehicles ($2.05 million).

What It Takes

According to Susanne Garfield, a CEC spokesperson, these scores emerged from a process that’s used for all of the competitive grant solicitations in the Alternative and Renewable Fuel and Vehicle Technology Program. Each of the eight criteria — Applicant/Project Team, Market Transformation, Market Viability, Project Implementation, Project Budget, Economic Benefits of the Project and Project Sustainability — gets a rating from 1-10, and carries a set weight between one and five. The scores, multiplied by their corresponding weighting factor, Garfield explained, gives you the total score.

Like many private investors, the CEC puts heavy weight on the qualifications of the team. Out of a possible 250 points for the whole application, the team members’ relevant skills, experience and plans for coordinating the different roles counts for up to 50 points.

Carrying equal weight is a category for “sustainability,” which covers how the project will deliver substantial reductions in reliance on petroleum fuels and in greenhouse gas emissions from California’s transportation sector, while also decreasing things like water waste and pollution and promoting use of renewable energy.

Economic benefits, such as how the proposed project will “expand business opportunities for or lead to the creation of California-based technology firms, jobs and businesses,” while stimulating economic development “in economically distressed areas or for low-income and minority populations,” also count for up to 50 points. Market transformation and viability — as in, the important question of whether the products emerging from these state-backed projects will actually make their way into customers’ hands and onto California’s roads in significant numbers — are given less importance, accounting for only up to 30 points each.

Each member of the evaluation team, made up of technical staff, scores every application. To score the max 10 points in a given category, said Garfield, an applicant must impress the evaluator with a response that is “complete, specific and superior, both quantitatively and qualitatively.” All of these ratings from the individual evaluators are then averaged to produce the final score and a ranked list for approval by the Transportation Committee.

“This review process has worked well for Commission solicitations for many years,” said Garfield. “Although it requires more staff resources having multiple team members individually score the proposals, it allows a more balanced, impartial review and a final score that better reflects the quality of their proposal.”

If We Build It, Will They Come?

The evaluation teams do not have an easy job, taking roadmaps for complex, ambitious manufacturing projects in a nascent market and determining which ones are most likely to further the state’s economic and environmental goals, and the whole process is laudably transparent. What may make the task even more difficult than necessary, however, is that unlike the Department of Energy’s process for evaluating proposals for its highly competitive loan program, for example, there is no back-and-forth between applicants and the evaluators following the initial submission, said one source familiar with both programs, which leaves more room for misunderstanding (or overestimating) what a project can or will actually accomplish.

Green Vehicles President and co-founder Mike Ryan told us in an interview that he believes his company earned the high score in this round of proposals due in part to his team’s focus on job creation in an area with a 10.8 percent unemployment rate (as of June 2010), as well as support from the local community and efforts to produce an electric vehicle that’s more efficient than models now in the pipeline from major automakers.

Oddly, however, Green Vehicles’ 145-page application, which we obtained from the CEC, fails to address the particular challenges and issues that should be expected for a three-wheeled vehicle classified as a motorcycle. The project summary states clearly that the company would use the state grant to work on a pilot production line for the three-wheeled Triac model, using batteries from fellow awardee Leyden Energy. And the company projects that it will grab a slim 1.5 percent of the electric vehicle market by 2013, finding buyers for up to 4,000 of the niche Triac model. Yet Green Vehicles’ discussion of market transformation and viability centers on claims that the Triac’s $24,995 price tag and up to 100-mile electric range will bring electric mobility within reach for the masses.

When it comes to electric vehicles, however, there’s no assurance that if you build it, they will come. A lot more goes into the decision to buy a vehicle than how much it costs up front and how far it will take you on a full charge. Those will be huge competitive factors for the upcoming generation of electric vehicles, but they’re moot points if basic demands for durability, safety, style and seating capacity aren’t satisfied. Similarly, sustainability and economic benefits are important factors for the CEC to consider in doling out its funds for promoting advanced vehicle and battery projects, but if a technology doesn’t actually gain traction in the market, those theoretical jobs and emission reductions and new businesses probably won’t survive long term, if they come to fruition at all.

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